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Craigs at the Helm

The task of absorbing the equivalent of 15 years of cost inflation in just six months has intensified the commercial pressures facing Scotland’s meat processers says Alan Craig, newly appointed president of the Scottish Association of Meat Wholesalers (SAMW).

“Cattle prices went from 215p a kg to 300p a kg in the half-year to June 2008, an inflationary increase which you would normally have expected to have been spread over 15, maybe even 20, years,” said Mr Craig, speaking this week after chairing his first SAMW executive council meeting since taking over from Allan Jess, Association president for the past three and a half years.

“With consumers paying only a small part of this increased price at the retail level, processor margins have remained extremely tight throughout the past year. Margins certainly haven’t grown during 2008/2009 and that has left SAMW member companies facing a major business challenge.

“One solution is to seek to improve operating efficiencies, although this is a demand which processing businesses are always addressing in any case. In addition, meat wholesaling has always been a business run on tight margins, so the scope for further economies is extremely limited.

“I’ll be looking to carry forward many of the projects which Allan Jess has been pursuing, particularly in relation to the regulatory environment in which our industry operates.

“At a commercial level, of course, we’ll be looking for further growth in retail values with consumers taking a slightly larger share of recent cost increases. Being realistic, however, the current economy is unlikely to allow major retail price growth to be achieved in the short term, no matter how justified such a rise in retail values may be. We must therefore look elsewhere for improvements, which will help reduce our operating costs and make our own drive for efficiencies easier to achieve.

“A crucial requirement in this respect is for the regulation of our industry to become much more realistic and reasonable. SAMW has no problem whatsoever with cost-effective regulation which serves a real purpose within our industry. We all, as individual food businesses, place hygiene at the very top of our list of operating priorities. Having said that, we do not believe some of the regulatory processes we have to endure are at all warranted.

“Take, for example, the anomaly of VMD (Veterinary Medicine Directorate) residue testing. This process focuses on items which are never seen within our industry, certainly not in recent years. VMD testing is therefore a totally outdated requirement, albeit a requirement which cost one of our member companies £60,000 last year. That’s a £60,000 cost, incurred for absolutely no benefit to the company, its retail customers or consumers. For a tight margin industry, this is unacceptable treatment, which could easily be avoided, given a much needed improvement in empathy from our political leaders.

“I could make similar comments about the Food Standards Agency, Meat Hygiene Service, SEPA and so on. We’re constantly talking to officials from these organisations, often agreeing on points of potential progress. Unfortunately, translating agreement into action is invariably a tortuous task. Sadly, the pace with which change happens, such as the ultra slow unravelling of TSEs, leaves our industry stuck in a high-cost regulatory time warp. This is damaging to businesses and a threat to the future viability of many rural communities.

“Changing this fact will be a high priority of my presidency. It was exactly the same for Allan, who worked extremely hard during his leadership of SAMW. Our message today, therefore, is that we will not step back from seeking progress on regulatory reforms. We have a modern industry, superbly equipped and run processing plants and we need an equally modern and superbly run regulatory framework. We won’t rest until we achieve that objective.

“There is, of course, one final issue of vital importance which will ultimately dictate the on-going size and value of our whole industry, namely the level at which livestock production continues in Scotland in the future. We are facing a critical mass challenge on livestock numbers and cannot afford any further erosion of breeding herds and flocks. The Pack Committee, whose interim report is due in less than three months, carries a heavy responsibility. There is a growing sense of anticipation concerning the Committee’s comments and recommendations. This is, after all, the one and only chance we will get to halt the current decline in livestock numbers and we cannot afford to get it wrong.”

The Association’s new junior vice president is John Craig, Operations Director with AK Stoddart, Broxburn, whom he joined in 1987 as a procurement officer. He has been in his present post with the company since 1995.